Question
You are the cost accountant at Flyweight Ltd, a company with a December year end. The company produces and sells toy hangliders. These hangliders are
You are the cost accountant at Flyweight Ltd, a company with a December year end. The company produces and sells toy hangliders. These hangliders are producesd using two types of materials: polyfibre plastic and light weight steel. To produce one hanglider, 600 grams of plastic and 1,75kg of steel are required.
You have obtained the sales forecast for the next year from the sales director, which estimated sales for 2017 at 150 000 units.
You also had a meeting with the production manager who said the following: I estimate that we will have 15 000 kg of steel left over at the end of December 2016, but I am concerned that the price of steel will increase in the future, so at the end of 2017, I would like to have at least double that in my reserves
When asked about the plastic, he said: We had a large order this year that was cancelled at the last minute. This will lead us to sit on 10 000 kg of plastic at the end of 2016. This is way too much. I could strangle the sales director! Nowwe have to carry the additional holding cost. Normally we only have about 7 000 kg of plastic at year end. I will make sure that this does not happen again in 2017!
Fortunately, the purchasing department was able to secure the same prices for 2017 than 2016 for both steel and plastic:
Polyfibre plastic | R25 per kg |
Light weight steel | R18 per kg |
REQUIRED
Prepare the materials budget for the 2017 year. You can assume that there are no hangliders in finished goods or work-in-process. Show all calculations clearly.
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